FamilyCare Must Start in January 2003

The Ryan administration on February 15 filed with the federal government a waiver that would allow Illinois to begin FamilyCare, the health insurance program for the uninsured parents of children whom KidCare or Medicaid covers. Gov. George Ryan also included in his budget proposal an appropriation authorizing the Department of Public Aid to use the federal funds that the waiver would generate to start FamilyCare on January 1, 2003.

The General Assembly must keep this appropriation in the final budget. The FamilyCare appropriation has no impact at all on the state budget crisis.

The Illinois waiver sets up a program of health insurance choices. All beneficiaries at any income level would have a choice between state-administered Medicaid (or Medicaid look-alike) or a cash subsidy to help pay premiums for employer-based or private coverage.

The Illinois waiver asks for federal funding for 65 percent of the cost of the program. The waiver also asks that part of the 35 percent Illinois share of the cost be satisfied by up to $45 million of current Illinois spending on health insurance programs that do not receive any federal matching funds. If approved, this would allow Illinois to receive around $80 million in federal funding with no new state spending. Therefore:

• The first $80 million for FamilyCare would be fully federally funded. These are the funds in Governor Ryan’s announced budget (because he proposes implementation halfway through the year, the appropriation is $40 million). There would be no new state general revenue fund (or other) spending. These federal funds may not be used for anything else. If we do not use them for FamilyCare, we will not receive them at all. This proposed first step for FamilyCare would set eligibility at approximately 65 percent of the federal poverty level and reach 80,000 families beginning January 1, 2003.
• The eventual full implementation of FamilyCare will be 75-80 percent federally funded. When FamilyCare is fully implemented to cover families up to 185 percent of the poverty level (up to approximately 230,000 families), the full cost of the program will be in excess of $300 million. New state spending, however, will be $60-70 million (depending on enrollment). This means that new state spending will be only 20-25 percent of the total program cost. This is an excellent investment for Illinois.

U.S. Department of Health and Human Services Secretary Tommy Thompson will rule on Illinois’s waiver application by the middle of May 2002.

Illinois will retain authority to deal with FamilyCare appropriately given state finances. The state will not be committed to spend money in years after the 2003 fiscal year beyond its means and choices. Because FamilyCare is not designed as an entitlement, the state will have the full array of administrative and legislative means to keep spending within authorized levels.
Eleven reasons why FamilyCare should move ahead in the 2003 fiscal year if the waiver is granted are:

• The start-up for 80,000 families on January 1, 2003, is fully federally funded.
• This is a positive accomplishment for this General Assembly for low-income working families already under pressure from the economy and the difficult state budget.
• Illinois risks losing the federal funds that would pay for FamilyCare if it does not use them now—access to the funds (the Illinois KidCare allotment) is time limited.
• This is a major work-force investment being made all across the country. Nineteen other states already have parent coverage. Michigan and New Mexico also have waivers pending.
• Businesses support FamilyCare. Health insurance improves the health, productivity, and employability of workers.
• FamilyCare’s premium subsidy program will keep healthier employees in employer-supported health plans; this controls premium increases. Otherwise, due to rising costs, healthier employees are opting not to be insured; this leaves employers with sicker and smaller insured groups, leading to higher premium increases.
• Health insurance allows people to access preventive and maintenance health care; this saves the expense of later acute care.
• Enrolling parents helps enroll more children. Covering parents increases well-child use of medical services.
• FamilyCare will decrease uncompensated care at hospitals.
• FamilyCare will decrease family financial stress and personal bankruptcies.
• FamilyCare will not be a center of medical inflation. It costs only $109 per month per member. There will be no long-term care. The average prescription drug use will be three prescriptions a year.

For more information, contact John Bouman, National Center on Poverty Law, 312.263.3830 ext. 250.